Competing new proposals on chain stores in S.F.

John Coté, J.K. Dineen

July 18, 2014Updated: July 18, 2014 4:54pm

Photo: Paul Chinn, The Chronicle

Image 1of/5

Caption

Close

Image 1 of 5

Phil Jaber prepares a cup of one of his signature coffees at the
birthplace of his local Philz Coffee empire, at 24th and Folsom streets,
in San Francisco. Philz Coffee currently has 6 locations in San
Francisco, well under the current threshold of 11 locations to trigger
chain store restrictions. less

Phil Jaber prepares a cup of one of his signature coffees at the
birthplace of his local Philz Coffee empire, at 24th and Folsom streets,
in San Francisco. Philz Coffee currently has 6 locations in ... more

Photo: Paul Chinn, The Chronicle

Image 2 of 5

In this file photo, a bicyclist rides by a Walgreens store in San Francisco. Walgreens has over 67 locations in the city.

In this file photo, a bicyclist rides by a Walgreens store in San Francisco. Walgreens has over 67 locations in the city.

Photo: Justin Sullivan, Getty Images

Image 3 of 5

In this file photo, Steve and Jennifer Sarver at their Battery and Sacramento Street San Francisco Soup Company store. Legislation is coming to the SF Board of Supervisors which might relax the current threshold of 11 locations to trigger
chain store restrictions in some San Francisco neighborhoods. The company currently has 11 locations in San Francisco. less

In this file photo, Steve and Jennifer Sarver at their Battery and Sacramento Street San Francisco Soup Company store. Legislation is coming to the SF Board of Supervisors which might relax the current ... more

Photo: Kim Komenich

Image 4 of 5

In this 2012 file photo, construction of a new Walgreens store on the corner of Jones and Bay Streets in San Francisco 2012. There are eight Walgreens within a mile-and-a-half radius and 67 total in San Francisco. less

In this 2012 file photo, construction of a new Walgreens store on the corner of Jones and Bay Streets in San Francisco 2012. There are eight Walgreens within a mile-and-a-half radius and 67 total in San ... more

Photo: Jason Henry, Special To The Chronicle

Image 5 of 5

A Starbucks greets customers at the entrance on Mission St. at the new CityTarget store at the Metreon in San Francisco.

A Starbucks greets customers at the entrance on Mission St. at the new CityTarget store at the Metreon in San Francisco.

Photo: Michael Short

Competing new proposals on chain stores in S.F.

1 / 5

Back to Gallery

Don't expect a McDonald's to crop up in North Beach, but a Philz Coffee? That's another question.

San Francisco has taken a step toward loosening the definition of what qualifies as a chain store in the city, with the Planning Commission voting late Thursday to increase the total number of outlets a business can have before counting as a chain.

To protect smaller local businesses, the commission also voted to apply overseas locations to that total, which hadn't been included before, and to expand the criteria of what qualifies as "formula retail" to include businesses such as gyms and insurance offices.

The 5-2 vote for the proposal to increase the number of outlets, being advanced by Mayor Ed Lee's administration, sets up a showdown at the Board of Supervisors, probably in September, over competing legislation by Supervisor Eric Mar. The commission also forwarded on a revised version of Mar's proposal Thursday on a 4-3 vote. The Planning Commission's votes and changes are simply advisory and not binding on the supervisors.

The main difference is that Mar's would keep the current threshold of 11 locations as the trigger for chain-store restrictions. The proposal from the Planning Department increases that number to 19.

Mar's camp is still hopeful a compromise can be reached on a single proposal, but the supervisor opposes relaxing the threshold number of 11 businesses, which was approved by voters in 2006 as part of Proposition G.

Chain stores have been a controversial topic in San Francisco for more than a decade, with concerns that they drive out mom-and-pop businesses and cheapen neighborhood character while channeling profits to corporate headquarters elsewhere. Supporters say the stores can offer lower prices, provide jobs and keep sales-tax dollars in San Francisco rather than having residents drive to places like Colma or Daly City to shop in stores like Home Depot.

The issue hit a boiling point last summer when at least four supervisors sought different legislation to limit formula retail, in part because local shop owners complained they were being driven out of business because only larger corporations could afford the rising commercial rents in San Francisco's tech boom.

The city then undertook a comprehensive study of its formula-retail controls, and the upshot was the two proposals considered Thursday.

San Francisco has a patchwork of rules governing formula retail that vary by neighborhood. The rules range from no restrictions, in areas like Fisherman's Wharf and the downtown core, to an outright ban.

Currently, if a business like a restaurant, bar or retail store has 11 locations in the United States, it is considered formula retail under San Francisco's laws. Over a large swath of the city, such businesses can add a 12th, or additional, location only with special approval from the city, a "conditional use" permit that requires additional cost and effort. To do so, the business must demonstrate that its proposed new store is "necessary and desirable."

Lee's administration believes the 11-store cap has been a drag on the growth of home-grown small businesses like Blue Bottle Coffee and Philz Coffee, which are reviewed under the same rules as Starbucks or Subway, which have more than 20,000 locations each.

Philz has 14 locations, for example, and would need a conditional use permit to add any more locations in San Francisco, which can mean paying rent for months on a yet-to-open location while waiting for approvals.

That's not much of a burden, counters Mar's office, saying 75 percent of applicants get approved.

- John Coté

Have a cup: Mid-Market is about to get a lot more caffeinated.

Long-vacant spaces in two historic buildings in the heart of central Market Street will be lit up with the stand-alone stores of a pair of Bay Area businesses that, while globally known, have never had a retail presence in the city.

David Rio will open a 2,500-square-foot chai tea cafe at the Eastern Outfitting Co. at 1019 Market St. The store will occupy the ground floor of a renovated building that recently became Zendesk's headquarters.

Across the street on the northeast corner of Sixth and Market streets, Equator Coffees & Teas is opening a cafe in the Warfield Building, next to the Warfield Theater. The 1,000-square-foot space will have a circular coffee bar and lots of outside seating.

The two leases will probably be only the beginning of central Market retail moves. Several deals are coming together at 995 Market St., according to market sources.

And at the old Hollywood Billiards building at 1028 Market St., construction crews are building spaces for pop-up retail uses to fill the structure while the owners go through the approval process for a larger residential development. Meanwhile, at Market Square, home to Twitter, three restaurants are being built, along with a grocery market, a gym and a First Republic Bank.

Jay Atkinson, whose Cannae Partners owns 1019 Market St., said "We didn't know how the retail would shake out" but that multiple offers came in from qualified tenants.

"It's not chains that want to go into Mid-Market. It's these incredible local retailers that can see what is happening on the street level on Market Street," he said.